In response to a cost-reducing technological breakthrough in the production of its product, a profit-maximizing monopolist will normally
A) increase price and decrease production.
B) not change its level of output or price.
C) decrease the price it charges for its product.
D) increase its output and practice price discrimination.

Question

Quizplus · Accepted Answer

A cost-reducing technological breakthrough lowers the monopolist's marginal cost, allowing it to produce more at a lower cost. To maximize profit, the monopolist will decrease the price to sell more units, as the lower cost allows for a higher quantity to be produced profitably.

In Response to a Cost-Reducing Technological Breakthrough in the Production